PPACA 102-Can I get a Subsidy?

We've all heard that under PPACA, subsidies or tax credits will be available to help offset the premium cost for those who will have difficulty affording coverage. These subsidies are split into two classes: Individuals and Small Businesses. Today, you'll learn what they are, how to claim them, and how to figure out if you're eligible.

As far as what the exact amount will be, or how much a plan will actually cost you, we have to wait until October when the exchanges open. We do not have official rates for these plans yet, and as you will learn, the subsidies are a function of your income and (strangely enough) the average price of the second cheapest "Silver" level plan in the state.

Small Businesses

Small businesses are defined under PPACA as a company having 2-50 employees. Subsidies are available for small businesses with less than 25 employees, making (on average) less than $50,000, where the employer pays at least 50% of the healthcare premium for those employees. The maximum subsidy, which is 50% of premium, is only available for companies with less than 10 employees, making (on average) less than $25,000, where the employer pays all (or almost all) of the healthcare premium.

There is some lee-way. Owners and family members may be exempted from the count (and more importantly, their usually higher pay can not be counted as well). Creative accounting can be used to manipulate the total number of employees as well. These intricacies will be saved for later, we're just going over the basics for now. If you would like to learn more today, visit the IRS page here: http://www.irs.gov/uac/Small-Business-Health-Care-Tax-Credit-for-Small-Employers for the guidance, 8941 tax credit claim form, and more instructions. You might want to have your accountant and HR team with you, this is not a basic form, there are hours of work involved. For reference, this has been available since 2010. About $4 Billion was set aside to pay these credits, and only a fraction of that has been claimed due to how onerous the reporting requirements are, and how small the credit can be.

Individuals

Luckily, for individuals, the determination is much easier. Basically, it all ties back to %FPL, or Percentage of Federal Poverty Level. If you're between 138% and 400% of FPL (For NY specifically. Other states have 100-400% if they chose not to expand Medicaid.), you qualify for subsidies (bigger subsidies for the lower your percentage). People under this threshold would be Medicare eligible.

It's math time again! Basically, at 400% FPL, an individual in 2014 may make up to $45,960 of MAGI income (Modified Adjusted Gross Income, there are some rules around how this is calculated, and we suggest you consult your accountant or tax professional for assistance in calculating your exact figure). This figure is calculated per household where the first person gets the full figure, spouses, domestic partners, and dependents add an additional $16,080 each. 

Example: Family of 4, Husband and wife both work. One is counted at $45,960, other is $16,080, as is each child, for a total of $94,200. As long as the household MAGI income is under $94,200, they will be subsidy eligible.

Of course, you can apply a bit of math to find you exact percentage. We won't delve into that today, as there isn't much we can do with it yet. There will be "fill-in-the-box" style calculators available when the exchanges go online to make it easy to figure out.

If you fall under 250%FPL, you may be eligible for what is being called a "cost sharing subsidy". Basically, the Marketplace will pay part of your Co-Pays and deductible to help make the plan more affordable. 

Unfortunately, because all of these subsidies are indexed to plan premiums and the exact MAGI income of the household of the policyholder, it is basically impossible to give estimates of what it will actually cost you today. When the marketplaces open, calculators will be available that will give your exact cost. There are some available right now, but they are all "estimates" based on expected premium, not hard numbers. They may b